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A Crash Course in Social Entrepreneurship, Part 2

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Earlier this week, I posted some of the most common questions I get from entrepreneurs and aspiring entrepreneurs -- a list that was inspired by a lengthy correspondence I had recently with a group of California MBA students. Here is the second half of that list, focused on the dynamics of social entrepreneurship.

Why social entrepreneurship?
I have always had a personal interest in social causes, and incorporating that passion into my business came naturally -- tea is a beverage that we recognized had a "natural" link to everything we wanted to accomplish -- a healthy product with a strong connection to the environment. The other interesting thing about tea is that it is consumed by some of the world's wealthiest cultures but consumed by its poorest, so there were clear and immediate opportunities for creating community wealth.

How can a company have a social impact?
Honest Tea was created to be an agent of environmental and social change, but what I've learned is that different people answer this question different ways. Our consumers will say that they've benefitted from a healthier product for themselves and their kids. Workers in the tea gardens we source our tea leaves from will say that they have benefitted from our Fair Trade and organic purchasing, and the eco-systems of our supplier communities (if they could talk) would appreciate the reduction in synthetic chemicals in the environment. But the impact I see everyday is the connection we are making with millions of American consumers who appreciate the product AND the way we operate as a company.

How does Honest Tea do all of this?
Most of the sustainability initiatives we have implemented make great business sense, so within the company, there's not much controversy about how we operate. For example, our office is designed in a more sustainable way, but it's also an attractive space that helps make people happy working there. It might be harder to argue that giving away bikes to employees is a great business decision, but I decided this was an important reward for their hard work, and a nice way to communicate our values to our employees. Outside the office, Honest Tea focuses on sustainability through green energy, recycling programs for Honest Kids, Plant a Tree and Bethesda Green. But the greatest impact may be through our product itself -- we are making important strides with respect to reducing the environmental footprint of our packaging. Our bottles are the area where there is the greatest room for improvement.

Be "Honest" about Coke.
The key element of the Coke relationship is that while we haven't changed any aspect of our product, we've dramatically changed the universe of people who will be exposed to our product. For example, I just found out that our drinks will be served at Fenway Park -- a place near and dear to my heart. We would never get that kind of exposure without Coke's help. Coke is supporting the rapid expansion of the brand, and we are running the business.

But why -- was it profits or competition?
We weren't as worried about profitability as we were about sales growth. The only way Honest Tea can have a widely significant environmental and social impact is buying selling lots of product, and Coke can help us do that. While we continued to grow in keeping with our annual compound growth rate of 66 percent, I had concerns about our ability to maintain that pace a few years from now. We've never let the competition drive our own strategy -- our mission drives our strategy.

Big can be beautiful, too?
We've seen our friends at Stonyfield Farm Yogurt grow to more than $300 million in sales, and they certainly seem to have maintained their commitment to mission. I think one of the biggest challenges accompanying growth is maintaining the culture of the brand. One of the ways we've helped to insure continuity is by hiring and promoting from within. We have a robust intern program, and count nine former interns among our 95 employees, nearly 10 percent.

How does a social entrepreneur get started?
The advice I'd give to an aspiring social entrepreneur is no different than that I'd give anyone starting out -- it's important to get some experience selling something. It's not for everyone, and if you don't feel comfortable being a salesperson, if you can't handle rejection or don't like the feel of it, find something else to do, because even if you don't end up selling your product, you need to sell investors, employees, vendors and the public on your enterprise.

Is there an advantage to being a social entrepreneur?
Social entrepreneurs have the edge over traditional entrepreneurs because they bring a passion to their work that is fueled by a belief in what they are doing. I appreciate the benefits of money, but if building Honest Tea were only about making a payday, I would have switched to something easier long ago. The only risk with social entrepreneurs is that they occasionally let their passion cloud their judgment.

Last updated: May 1, 2009

SETH GOLDMAN is the President and TeaEO of Honest Tea, the company he co-founded in 1998 with Professor Barry Nalebuff of the Yale School of Management. He's preparing the September release of a graphic novel titled Mission in a Bottle.
@HonestTea




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